4. Four steps for business analysis are discussed in the chapter (strategy analysis, accounting analysis, financial analysis, and prospective analysis).
As a financial analysts, explain why each of these steps is a critical part of your job and how they relate to one another?
a. Business Strategy Analysis
This analysis is help managers to identify key profit driver and strategy risk. Business strategy analysis includes analyzing a firm’s strategy and its strategy in order to create competitive strategy. Most managers set corporate goals and then start to formulate the strategies that help to achieve those goals. However the most critical is how two fundamental problems is the connection in approaching the strategic management. First, most business are engage in concerns and have set in certain activities that are a reflection from decision made in the past. Second, managers are tempted to engage in a strategic of the firm without understanding the health of their existing strategy. This can create a new problem for present strategy. After indicate a strategy process complete, the manager then can assess the quality of the strategy.
b. Accounting Analysis
The purpose of this analysis is to evaluate accounting quality system in a company by assessing of the stability, viability, and profitability of a business or a project. An accounting analysis carried out by professionals who know how to prepare reports and how to use of info obtained from financial statements and other reports. One of the key areas of accounting analysis is to conclude of company’s past performance into an estimate of future performance. Accounting analysis is includes of calculating ratios from the data to compare with other companies.
A comparison of two direct competitors in the motorcycle market, Harley Davidson (a fortune 500 company) and Honda, a producer of cars and motorized vehicles, reveals through the analysis of the businesses that investment into Harley Davidson would benefit the investing person or group. The American company, based out of Milwaukee Wisconsin raised its profits by 44% to $170.2 million in the first ...
c. Financial Analysis
This analysis is use to calculate the investment value of a business, stock or other asset. There are two important skills need related to financial analysis. First the analysis has to be systematic and efficient. Second, allow the analysis to use financial data to explore company issues.
Financial analysis can help an investor to get wealth of information about a company. Knowing relationship between ratios and what the function for future are key to determine future success. Financial statements are essential for business because this can help management to find information and knowledge for investor.
d. Prospective Analysis
This analysis is focus on forecasting analysis of future financial information of a company and the last step from business analysis. The key areas in this analysis are projecting income statement and projecting the balance sheet. The most important element is the forecasting of the revenue growth. This is based on PEST analysis; industry analysis; company-wide analysis. Forecasting has to be comprehensive including all financial statements. The key should be the key measures such as sales growth, ROE, and earnings.
3 Questions for discussion
1. What is the biggest effect after Dot-Com crash in 2000 for investors? 2. What are the primary factors that led to the burst of the Internet bubble? 3. What is the different between buy side analysts and sell side analysts?